over 2 years ago • 2 mins
The years-long wait for a US-listed bitcoin exchange-traded fund (ETF) finally ended on Tuesday. But while first-day trading volume exceeded $1 billion, retail investors mainly stayed away, according to data from VandaTrack.
The chart shows how the ProShares Bitcoin Strategy ETF (ticker: BITO) attracted $7.7 million of cash from small investors on its debut. That’s not bad, sure, but it’s only a seventh of the $57 million retail investors piled into crypto exchange Coinbase (ticker: COIN) on its first day as a public company in April. And it’s less than the sums crypto-focused firms like Marathon Digital (ticker: MARA), Riot Blockchain (ticker: RIOT), and Bit Digital (ticker: BTBT) attract on a daily basis.
There are two major reasons why retail demand for this high-profile launch was so tepid, according to VandaTrack. For a start, smaller investors generally get more excited about single stocks than ETFs: they buy Virgin Galactic shares over the Ark Space Exploration & Innovation ETF and Tilray over ETFs that track the entire cannabis industry.
And, secondly, the futures-based structure of the ETF, which means its performance will lag behind the actual price of bitcoin whenever the futures market is in contango – when longer-dated contracts cost more than short-dated ones. As VandaTrack puts it, “retail investors are probably aware of the ‘contango trap’ which makes BITO a subpar instrument to gain exposure to bitcoin.”
So if retail investors weren’t buying the ETF, who was? VandaTrack points to a combination of investment advisors, private banking clients, and professional investors shorting the ETF to profit from the contango.
With dozens more futures-based bitcoin ETFs heading for the market, it’ll be interesting to see if demand holds up. It may take approval of a US ETF backed by spot bitcoin prices – rather than futures – before enthusiasm really takes off. After all, most small investors can just go and buy some bitcoin if they really want some.
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